eNotes: Liability – January 2025 – Federal

SIGNIFICANT CASE SUMMARIES

Federal Case Summaries

Burlington Stores, Inc. v. Zurich Am. Ins. Co.
United States District Court of New Jersey
2024 U.S. Dist. LEXIS 216380

Decided: November 27, 2024

U. S. District Court of New Jersey dismisses claims for coverage stemming from lost profits due to store closures during COVID-19 pandemic.

Background

Plaintiff Burlington Stores, Inc., retailer of clothing, beauty merchandise, footwear, accessories, home goods and toys, sought declaratory judgment against its insurer, Zurich Am. Insurance to provide insurance coverage for business losses Burlington sustained during the global pandemic in 2020. The coverage battle, which fought its way through New Jersey State Court, was recently dismissed by the United States District Court as the Court determined Burlington failed to set forth a claim for which relief could be granted. The Court found that Zurich owed no coverage for Burlington’s COVID-19 business losses.

In the action, Burlington sought relief after “[v]irtually every” state where it owned and operated stores forbid operation by suspending or severely limiting business operations deemed to be ‘non-essential businesses’. As such, Burlington alleged it was forced to close “all of its stores, distribution centers . . . and corporate offices” in order “[t]o combat the rapid spread of COVID-19 and to protect its customers, associates, and property[.]” Although Burlington began to reopen various locations on May 11, 2020, the gravamen of the Complaint hinged on business impediment and a loss in excess of $750 million, for which they were demanding insurance coverage from Zurich.

Holding

Zurich prevailed as the Court determined coverage only extended to Burlington under the generally determined interpretation of a “direct physical loss of or damage” to property. The Court found that business loss due to the COVID-19 pandemic and retail shut-down did not fall under Zurich’s policy, and as such the Court dismissed Burlington’s claim with prejudice.

Questions about this case can be directed to Elizabeth O’Connell at (908) 574-0513 or eoconnell@tthlaw.com.

Ahtasham v. Lyft, Inc.
United States District Court for the Eastern District of Pennsylvania
No. 2:24-CV-01673-GJP

Decided: September 12, 2024

Lyft driver able to pursue UM claim against Lyft.

Background

Plaintiff Khalid Ahtasham was in a car accident with an uninsured motorist while transporting a passenger for Lyft. Plaintiff suffered serious injuries, including a wrist fracture and carpal tunnel syndrome, leading to significant medical expenses and lost earnings. Prior to the accident, Plaintiff had entered into a contract with Lyft, which included a Driver Guidebook that promised a $1 million UM/UIM policy for accidents involving uninsured or underinsured drivers. Lyft had waived this coverage in Pennsylvania without notifying its drivers. As a result, Plaintiff’s claim for UM benefits was denied by the insurer, Progressive. Plaintiff argued that Lyft’s failure to provide coverage was a breach of contract.

Plaintiff sought uninsured motorist benefits, claiming breach of contract, fraudulent misrepresentation, violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, and negligent misrepresentation. Plaintiff also sought declaratory judgement that Lyft had a duty to provide him with up to $1 million in uninsured motorist coverage. Lyft moved to dismiss all claims and Ahtasham agreed to voluntarily dismiss all but the breach of contract claim. Lyft argued that the Guidebook was not part of the contract and that any representations in it were therefore irrelevant. Lyft relied on the Parol Evidence rule and a disclaimer in the Guidebook to support its argument. Thus, the issue for this Court was whether the Driver Guidebook was part of the contractual agreement between Ahtasham and Lyft.

Holding

The Court found that the Parol Evidence rule did not bar the use of the Guidebook to interpret the contract because the Agreement itself was ambiguous regarding Lyft’s insurance obligations. The Court noted that the Agreement referenced unspecified documents it “incorporates by reference,” which could include the Guidebook. There were other provisions in the Agreement that referred to Lyft’s auto insurance policy, supporting the claim that the Guidebook’s promises were part of the contract. The Court also found that the Guidebook’s promise was not invalidated by the disclaimer language. The disclaimer merely suggested that the Guidebook was not a comprehensive rulebook and might not reflect changes. The Court held that this disclaimer was not sufficient to override the clear promises of insurance in the Guidebook. Therefore, the Court found that Ahtasham had sufficiently pled a breach of contract claim, based on the allegation that Lyft had failed to provide the UM/UIM coverage.

Questions about this case can be directed to Jhanvi Jamindar at (717) 441-7056 or jjamindar@tthlaw.com.